In 9 Months, Anyone Can Invest in a Startup

Under the JOBS Act, the SEC has nine months to hammer out the rules for crowdfunding.

Do you feel like there are a lot of startups? We feel like there are a lot of startups. The JOBS Act, an amalgamation of six bills that passed through Congress, is likely going to make even more startups, thanks to a section that will allow the average American to invest limited amounts of money in business plans. AngelList, the crowdfunding platform Indiegogo, and a crop of equity-based crowdfunding platforms are poised to take advantage—but not for a while. The Act requires the SEC to hammer out the rules for equity-based crowdfunding within nine months.

“The SEC needs to determine the actual guidelines,” said Nick Tommarello, one of the founders of WeFunder, an equity-based crowdfunding platform that decided to launch a preliminary site before the law passed. “Then we apply to the SEC.”

The SEC has said publicly that it is “cautious” about the new crowdfunding /crowd investing rules. The agency could have loosened the rules on who can invest earlier, but declined to do so on its own, Mr. Tommarello said.

“This is exactly how government can catalyze job creation, encourage the entrepreneurial spirit and maximize the possibilities of online crowdfunding platforms like Indiegogo simply through cutting regulations – and at zero cost to tax payers,” Indiegogo founder Slava Rubin, who also participated in a roundtable discussion with President Obama before the signing, said in a statement. “There are more than 5,000 current funding projects on Indiegogo and now the law is finally catching up to technology. We bank online, shop online and there’s no reason we shouldn’t be able to help create jobs online. We’re excited how this bill will democratize fundraising and as demand develops for equity crowdfunding we expect to enter that space.”

Two of WeFunder’s cofounders were also invited to the ceremony.

New crowdfunding platforms CircleUp and Crowdfunder are already fighting for a toehold in the space. AngelList has also expressed interest. Kickstarter declined to comment.

AngelList and WeFunder are also part of a trade organization being referred to for now as the Self Regulating Organization that will be consulting with the SEC on crowdfunding rules. The organization will have a formal roll call of members today.

CORRECTION, 4/6/12 3:25 p.m.: AngelList is not part of the SRO, AngelList’s Kevin Laws said in an email. “While we figure out what (if anything) we will do in that world, we have not joined any trade organization or SRO. We were invited to a meeting at which they discussed it and put our contact info down so people would know how to contact us, but that was it.” Betabeat regrets the error.